Credit, Attention, and Externalities in the Adoption of Energy Efficient Technologies by Low-Income Households
Susanna B. Berkouwer, Joshua T. Dean
American Economic Review · 2022 · Volume 112 · Issue 10
Abstract
We study an energy efficient charcoal cookstove in an experiment with 1,000 households in Nairobi. We estimate a 39 percent reduction in charcoal spending, which matches engineering estimates, generating a 295 percent annual return. Despite fuel savings of $237 over the stove's two-year lifespan—and $295 in emissions reductions—households are only willing to pay $12. Drawing attention to energy savings does not increase demand. However, a loan more than doubles willingness to pay: credit constraints prevent adoption of privately optimal technologies. Energy efficient technologies could drive sustainable development by slowing greenhouse emissions while saving households money.
Keywords
Consumer Economics: Empirical Analysis, Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making, Household Finance: Household Saving, Borrowing, Debt, and Wealth, Microeconomic Analyses of Economic Development, Economic Development: Agriculture, Natural Resources, Energy, Environment, Other Primary Products, Management of Technological Innovation and R&D, Climate, Natural Disasters and Their Management, Global Warming
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